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tv   Bloomberg Markets Middle East  Bloomberg  January 29, 2018 11:00pm-12:00am EST

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♪ ♪ ♪ saugata: asian equities retreat after u.s. stocks fell aft government bonds selloffer radel investors. --after government bonds selloff rattle investors. thanople killed and more 140 injured as violence flare in yemen. tosaudi arabia strives restore a friendly government
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under threat. the saudi international petrochemical company -- this is bloomberg markets middle east. quite a few adjustments happening in these markets and around the world. the s&p 500 dropped by the most in september. let me show you a increasingly red picture. msci a asia-pacific down 1% and the selloff has accelerated over the last hour. lf being led by the asx 200. nikkei coming in weaker. done 1.2%. dollar-yen trade holding steady. overall this is against the backdrop of a slightly stronger u.s. dollar that is weighing in on some of these key foreign-exchange basis. kiwi the only one able to buck
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that. australian sovereign bonds outperforming their u.s. peers. investors put in those bullish f bets. it is a story affecting alumina. --aluminium. we did have brent crude under pressure. down .06 percent. we are looking ahead to u.s. inventory. it is not only a story of stronger dollar but u.s. inventory expanding. ending a record run of declines. will this mean for the broader opec model tech equation? we are still close to the highest level that were reached. levels we close to early 2014. traders telling us momentum is lower on the trade and the south
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african rand is the key trade in the emerging market space. the dollar.inst applied volatility rising since the december. first word headlines. deborah: the house of representatives committee will seek clearance from the white house to release a classified republican memo that alleges bias and abuses a government surveillance of people surrounding president trump. congressional republicans say the fbi and justice department pursued the investigation of possible criminal and ties with the trump -- kremlin ties with the trump administration without credible evidence. >> we cross a line. there was a vote to politicize the declassification process of intelligence. correspondent: the deputy
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director of the fbi is said to quit early ahead of his or more retirement in march. -- his formal retirement in march. andrew mccabe has gotten criticism from president trump who said he was biased for hillary clinton during the election. the sixth round of talks in montreal was framed as pivotal but wrapped up with little progress. the u.s. trade representative wants real negotiations to be next roundat the in february. flare ofs been a violence in yemen. in brexitt brewing flare
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negotiations, with the u.k. pushing back against a october deadline for a deal. isxit secretary david davis nothing will be signed until britain has clarity over future trade negotiations with the block. brussels insists that the u.k. must continue to abide by u.k. rules including the european court of justice. >> during the transition, the u.k. will take part in the markets and the custom unions and to all union policies it will have full benefits. therefore, it must also apply ules to the market and it cannot be a la carte. correspondent: morocco's finance minister country benefited from imf precautionary liquidity
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line. will not renew. >> we may trade off in terms of our debt, which is the result of our needs. you want to manage our debt by reducing the risk of foreign-exchange. we have the opportunity to tap the bond market. correspondent: global news 24 hours a day powered by 2700 journalists and analysts in over 120 countries. this is bloomberg. ♪ yusef: let's go back to our top story. asian equities taking their cue from the states when the s&p 500 inl more than any time the last four months. hed legend bill gross,
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thinks it will hit 2.9% by the year end and we are joined for the latest on the story. this is a big week in terms of events in the u.s.. the state of the union and the fed. what will be the driver for the u.s. 10 year yield over the coming days specifically? >> we have a lot of event risk. ande of a -- the union the fed and payrolls. and the minth --month fed rebalancing flows. --have not seen much support for the treasury market but that might come through in the u.s. at times and today and tomorrow. we have the fed likely to conserve and then hike in march. that is perceived as slightly hawkish why the market. and you happy tru -- you have
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the trump state of the union. theight focus on infrastructure plan and that will excite the market. yusef: the record run we have seen in equities comes down to a simple principle. dhe return in equities outse the return we had with government bonds. as the treasury yields gets more 500 since 2008, that is how significant a move this would be. is this the turning point? will we see more pressure on equities in the coming days? i think that this chart is very important. it shows the relative appeal for treasuries but does not mean that equities have to get traded
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terribly. there is still a lot of liquidity in the system and that will chase returns. we might see more money move into bond yields as we see this on a relative basis. the three pillars of the global bond market and equities, which is good global growth, good earnings and the earnings season continues to be really strong. rampant liquidity r emains. just because we do not have volatility recently does not mean that will get volatility. the short round for equities does look more troublesome. the structural bond market looks solid. says thatdman sachs will be a buying opportunity. thanks for making it to the program.
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let's widen this conversation. let's bring in the head of interest rate strategies. i want to get your thoughts on the latest poplet's widen this . in u.s. 10 year and see how you see u.s. 10 year trading. the strategy for u.s. markets. >> are asking this question because you are assuming a 10 year u.s. treasury yields is a measure of the risk-free rate. free rate rises, the bar is higher for risky assets, . the dollar is a the measure of sset of financial conditions. what is meaningful here is, despite the rise in treasury yields, the dollar is falling. something has changed. treasury yield is
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premium.he risk the dollarhe reasons must attract a higher premium to remain stable in foreign exchange markets. no assumptions on this program. asking youi am about. u.s. consumer confidence versus presidential approval. certainly these have been moving in line but now they are moving in different directions. you see president donald trump is breaking with the convention economy they support and follow their leader. never have americans been so hopeful about economic prospects
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and financial fortunes. can this add to consumer confidence and the way you see the u.s. economy in 2018? >> from my perspective of thating markets, the asset matters most is the america first policy and what that means for u.s. policy around trade and protectionism and what it means for the u.s. the dollar. as far as the america first policy is concerned, it is a mercantile is currency -- mercantilist policy to cheapening the u.s. dollar. you get u.s. consumer confidence and presidential approval, this to my perspective is a noise. the most interesting thing about u.s. policy is protectionism and
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the america first policy. yusef: thank you. are you expecting a more hawkish statement than the one we get from the fmo see --fomc? hawkish, the is dollar gets no benefit. the dollar has been falling for over one month. some sort of a release rally cannot be ruled out but the biggest point around the world of foreign exchange is we're going through a pity -- a pretty big regime shift. previously the dollar and u.s. yield were positively correlated and now they are negatively correlated. money wants to get out of dollars into other currency. yusef: you have a point and there are other voices that share that view. i'm looking at a management note
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dollar'ssay the u.s. role as a global reserve currency is a myth. say on some ofr the emerging market space. government debt selloffs are gaining space. --could this be the beginning of a bear market in bonds. will explain what is behind the whopping third-quarter increase in profit. this is bloomberg. ♪
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♪ yusef: this is "bloomberg markets: middle east." let's get you up to speed on the middle east market equity action. mixed picture we saw amidst a few declines in dubai. i doubt the under pressure. .ocused on saudi arabia, up .
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kingdom holding recovered losses. losses recovered since the beginning of the anticorruption probe. the quick check of the latest business flash headlines. they have been named as copresidents. they will take the role from d imon who says he plans to stay in the top job for the next five years. investors are still unnerved about harassment claims. the company earns most profits are checking they that key staff meet the
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standards. wynn resorts slumped overnight. mcdonald's seeing a rise in customers in a sign that its new menu is paying off. of domestic food restaurants is up .4 percent from a year ago. mcdonald's 1, 2 and three dollar menus are going down well with more frugal buyers. companyk's started selling $500 flamethrowers over the weekend. it has already racked up $7,000. they have raised concerns about the legality of selling a weapon like that online. let's get back to the central bank conversation and what is happening with the five-year german bund.
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it comes out of negative territory for the first time since december 2015 minutes all that below zero after ecb officials are sticking to the assumption that the central bank a bond buying program will be wound down over three months and stead of wound to a halt. a gradual sloping of asset purchases. strategyhe expert on here with us. let's get a sense of what is happening with the ecb when you have different members saying different things. correspondent: well, when you theat once funny, -- when at 120, you are at the ecb will continue asset purchase until november.
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three or six months later we will see actual rate hikes from the ecb. from the minutes in december, it sounds like the governing council one or two front that l ow effect. mr. job you talk to down the expectation. for guidance from central banks is endogenous to what the markets are pricing in. --mr. mario draghi talked down that expectation. yusef: where does that leave you on some of the other major central banks? it's not only the story of the ecb. we also have japanese data with the strength about of the japanese economy. what would you recommend to clients at the moment in terms
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of the story out of japan. >> simple story. buy the yen. the bank of japan reduced its money operations and the ye ral rallied.en yen we see a very asymmetrical reaction. froma hint of tightening can send itn or ecb down further. we believe the yen is going to strengthen. we have a target of 105. yusef: what about other emerging market calls? how immune would emerging markets be against some major
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changes happening in key asset classes in the united states? >> emerging markets are strong, beneficiary from global growth and the weakness of the u.s. dollar. not all emerging markets benefit from higher commodity prices. a ia and the philippines are lready running deficits. the appeal of their currency outlook is diminished by higher commodity prices. a in addition, a lot of the other asian currencies have rallied strongly in recent weeks and currency markets never rum o --run in a straight line. from a timing perspective, this is perhaps not the best time to enter loans in local currencies.
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in terms of weakness of the u.s. dollar, it is good news for emerging markets. yusef: there's a lot of positivity in what you are saying. what about some of the risks. what worries you as you look to the next few months? the risks are technical. they are more about the amount pricedmism the markets in. up from aeng is month ago. yusef: great having you on the program. thank you for your insight. here is what is coming up, we will talk about morocco and their liquidity lines being cut. the uimf funding and broader bod
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issung programs. this is bloomberg. ♪
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♪ yusef: the finance minister of morocco says the country will not renew and imf funding facility. he says morocco will only tap the international bond market when the time is right. >> to make trade-offs in terms of our debt, which is the result of our needs. we want to manage our debt by reducing the risk of foreign exchange. there are other solutions it to finance the treasury, which is the opportunity to tap the bond market. we expect to reduce the debt to 2021.
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we want to re-stabilize the microeconomic balance by reducing the budget deficit which will reduce the debt to gdp ratio to 60% target. if we stay on this force until 2021, we will be able to meet the 60% target. pll -- pll was annt: important and useful facility. -- pll was important and useful facility. an it was useful in launching the freeforms use. it expires in july 2018. morocco says it has fulfilled its mission and there is no utility and renewing it again as the microeconomic frameworks are satisfactory. we are permanently ready but we are waiting for the right opportunity.
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there is no point in tapping the it andif you do not need when it comes to financing the treasury, morocco is not facing a certain need to tap the market.
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♪ york, 11:30 p.m. in new a: 30 in the morning in dubai. offasian equity session was to a soft start. msci asia-pacific up. is this the beginning of a larger rotation out of equities? let's check in on the first word headlines around the world. house ofthe representatives committee will seek clearance from the white house to release a classified republican memo that alleges bias and surveillance around
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people involved with president trump. e trump pursuit of th administration ties were made under false pretenses, the memo isaid. an attempt to compromise sources and methods. correspondent: the deputy director of the fbi is said to have quit early ahead of formal retirement in march. andrew mccabe has been the target of criticism by president trump who claimed he was bias towards hillary clinton in a 26 seen election. washington is calling for nafta.hroughs from montreal talks were considered critical but wrapped up without headway.
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they next round of discussions will take place in february. injuredle have been after violence in yemen. sides, oneolve two of which wants to restore the government after three years of war. u.k. is pushing back against an october deadline for a deal on brexit. david davis says it will be decided until britain has clarity on trade relations with the block. brussels says of the u.k. must mustnue to 55 e u 0 -- continue to abide by eu rules. >> the u.k. will take part in all union policies.
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it will have all the benefit. it mustre it almost -- apply all the rules. the market cannot be a la carte. global news 24 hours a day powered by more than 2400 analyst and over 120 countries. this is bloomberg. ♪ juliette: it is not a great day at all for trading. reflected by all this red behind me. asian stocks having biggest fall is december. following that weakness we saw in the u.s. russian and we saw the -- session and the 10 year yield down for the first time since 2014. the philippines leading the decline.
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australia also in late trade looking pretty bad. down .09. led by the material players but we had citigroup up. getting the target to the asx 200. lip coming in from the tech players. the new cayenne japan down by japan the nikkei in down by 1.5%. you are seeing a lot of the asian currencies underwater. more strength coming through in the greenback which has been off.y hold off -- sold construction at a decade high in seoul. mcau is what we are
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following after the sexual harassment claims against the chairman. an interesting piece from our bloomberg intelligence team saying that wynn macu is poised for growth. the ramifications of the alleged sexual harassment case weighing on the stock. you look at the broad picture, the msci asia specific index falling. every sector is being heavily sold off. the energy and material players coming under pressure. it down by 1.6 percent. a lot of aimless saying perhaps this is a little bit of a pullback we have and today is a from investors. yusef: let's turn our attention back to the region and bring in our guests. lth the head of asset and wea
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management. a few developments out of the kingdom. before we talk about the earnings, let's kick off with the anticorruption probe. and what are close you telling clients about investing? -- very positive sincetwo very positive, it is a country that is transforming. it is becoming very efficient and we are talking about earnings highlights. regarding corruption, it is like any international bank approached by regulators for the wrongdoing. they settled over an amount of money and they are fine. yusef: we're hearing from investors that transparency is not where it needs to be. we're not heard the sack extent of the settlement -- the exact extent of the settlement. >> they will do what they have
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to do to take care of these things as long as it is a good ending. yusef: you were talking about the earnings a minute ago. we put of a function for the --on a year to date basis, banks in saudi arabia up 9.3%. core element of your argument. is it too late to get in? >> it is only starting. let me give you one specific number. isyou look at growth, it s up 10%.earning companies managed much better. efficiency is there. it is transforming. yusef: where else should clients
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be getting exposure in the kingdom? >> we remained positive on non o il sectors like consumers and education. we look at basic materials, banks, financials, etc.. they will all benefit from higher oil prices. it issaudi arabia -- better in saudi arabia than 100 dollars oil. your take on the egyptian presidential election you playit change how the egyptian reform story? >> egypt is a new player in the capital markets perspective. it is a great story happening. we're looking at egypt and .ooking at a few names
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egypt is a new player in our portfolio. yusef: great to have you. ryan lemand from abs securities. let's talk about guitar. anar commercial bank posted 80% profit. total assets increased by 6.2%. despite what the bank chairman described as a challenging year for qatar. we are joined on the line from doha. where do you see profitability going? holds your roe going to now that provisions are on the way? >> i think the fourth quarter results reflect the effots we made to reshape the banks. look at the fourth quarter earnings, we may $344 million profit,
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and the previous quarter 90 million.out basically if you multiply that roeard you will get an that is seemingly better than we are right now. roe is low but it will come back as we finish the cleanup of our legacy book. aboutk the market is at 13%. marketl is to reach averages and outperform them. that is ever a four -- over a four year horizon. yusef: where do you see credit growth going for you in 2018? >> for the first time in the , commercialears
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banks outperformed the market in terms of loan growth. we did 14 percent loan growth, which is a percent loan growth in the market. grewyear our public sector is as a keysee ths area for growth opportunities and diversification of loan book . yusef: -- very competitive segment. in terms of how that sets the stage for more m and a activity. in terms of the competitiveness, we are seeing good upper entity. the government is committee --
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good opportunity. the government is committed to building up the blockade for the world cup. foodovernment creates more lifted a semi- -- food legitimacy, etc. banks inhere are good qatar. there is talk about merger between three major banks. we will have to see that done before there is any more consolidation in the sector. yusef: you would not think the commercial bank was interested in getting a slice of the m and a action? >> we have to make sure we are very strong in terms of capital and out profit generation. that is the best position to be and if there is any m and a activity. we will see whatever happens but we are focusing on making
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sure our investments in turkey -- omana dn in the uae are and the uae are performing. yusef: give insight on how you see funding trends going from here? >> gosar remains a aa rate count ry. there is tremendous appetite for quatari people in asia. wasid a road show and it interesting to see them put it in perspective. you'll see a slight increase in funding costs coming from the blockade but qatar's fundamentals remain strong. there is no shortage of demand
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for the paper. i would see a decrease in overall funding costs arising for overall impacts of the blockcade. qatar has shown itself to be resilient and the economy continues to grow. that is also mitigating any risks. yusef: we understand you have extended talks with tavares investment to share your stake in the abu dhabi bank. run us through your thoughts about when you do that -- you see that closing and what you would do with the capital. >> there are strong discussions going on right now. we will deploy the capital into
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a stronger and qatar business and in turkey. turkey has performed well for us. we see an opportunity to grow the business into a significant contributor of profits and that will need capital. that is helped by a stronger link between qatar in turkey at an economic level. yusef: as you look to the remainder of 2018, are you confident or expect any progress in resolving the ongoing standoff with the rest of the gulf? i do not have a crystal ball but the qatari economy has shown resistance and we are planning on the basis that were it to continue, we will plan accordingly. we see that as a now more or
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less business as usual because we have adjusted to this new equilibrium level. we are planning on the basis it may continue but if it comes as a result, that is great news for everyone. yusef: thank you very much for taking the time. joseph abraham, the commercial bank ceo live from doha. the earnings fame as the saudi international petrochemical company beefs of revenue. this is bloomberg. ♪
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♪ ♪ ♪ thef: it was a beef for saudi petrochemical company in the fourth quarter. 1.1 billion estimate. profit beat expectations. we are joined by the ceo and vice-chairman rouhani. i want to kick up with the
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outlook for the remainder of the year. specifically that you are coming to an industry with the higher profits making analyst more positive for the company goes. is that sustainable for the remainder of the year? >> good morning. i think it is going to be sustainable at least for the first half of the year. expectations, the growth is going to between 3% and 4% and with the shortage of supply, supply of methanol in china with the closure of some of the minds, there's going to be in balance in the --the closure of some of the mines, there's going to be imbalance globally. there could be some decline in d halfices in the secon but that is not material impacting the business. yusef: i was speaking to the analysts and one of the standout
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themes in 2017 was how you went about cost efficiency. any more on the table for the next few quarters? >> definitely. i think a part of the better 2017--weices in went through restructuring in key areas as a company. that will continue in the form of not necessarily restructuring but efficiency and creating value in some departments. in particular in marketing center. give me a sense of the changing landscape in saudi arabia. the government is coming out with a slightly expansionary budget now. >> there are mixed messages coming out in the business
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industry in general. trust and confidence in the business infrastructure and the legal infrastructure in saudi arabia. is on the budget side. transparency is important. on the other side, the increase expat is ons, especially on employees and laborers and families. that has impact on the business. not as significant on the retail business. what we have seen and petrochemical, two years ago, when the government increased fuel substantially, that was a problem but it was a wake up call for our industry. we have to change how we are running our business. we have to be more innovative and creative in saving energy
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ad to be able to run on financial model or business case model. yusef: what are you excited about that could unlock additional value -- much more than cost-efficient the or higher methanol price? >> to me, we are a strong believer in growth. we have demonstrated that in sipchem over the last 15 years. we've grown considerably. in saudi arabia the growth opportunity is very limited with the lack of basic products. there is some opportunity downstream but we have to be very careful. it is more into the basic u.s.-based on shale gas and we are looking into this area. it is not going to be easy
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because we do not know the business landscape in the u.s. but we are targeting to do something this year in the u.s. and more in the doubt into saudi arabia -- downstream to saudi arabia. yusef: how aggressive are you going with that budget? are you setting aside cash quota? >> i would not say a lot. if we decide to go into the united states, we have to partner with a local u.s. company. this will be our international project. we have offices in europe and asia but no hard assets. we are not going to be significant to the point -- it is not going to be significant to the point where we have to go and borrow more money. we will synthesize from some of the existing cash perhaps opportunities at that time. yusef: the board is proposing off a real a share in terms
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dividend 2017. we have been talking about potential rationalization in the high dividends of the past not being sustainable going forward. will that be a conversation you think you will be having in the coming months? >> we had that discussion a year ago at sipchem and we had it six months ago. we have established a high expectation for our shareholders. in hindsight, we were looking into 12.5 percent of share value systemically e it-over-year until we wer with higher gas prices --lower gas prices. since wethe first year went public that we did not distribute dividends. our board started looking into a more balanced dividend policy.
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2017 and our for earnings have legal be higher for the two years. yusef: thank you for your time. ahmad al ohali the sipchem chairman live from the kingdom. put $4d they will billion in a liquidity crunch of this quarter and they say they have held meetings with government and banks as well. this comes back to the indebted chinese conglomerate. saying some sap lines they will be impacted by callidus software for $36 a share. we wrap up the show with ryan. ryan, where does oil go from
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here? >> we have been positive for quite some time. 4 or 5 facts, the market is balanced, demand is expected to exceed 100 million barrels by the end of the years, stocks to conception is -- stocks to consumption is implying an oil price of 70 or 80 dollars. yusef: we are getting breaking lines. a busy last five minutes of the show. yemen rebels fired a ballistic missile at riyadh airport. riskuch of an escalation exists with the situation and yemen and how connected is it
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with the price of oil? >> geopolitical pricing is oil prices.lar of any actual impact, pipeline disruption, this can spikes oil quite substantially. yusef: are you worried this can get out of hand in yemen. we are getting reports the fighting is intensifying in yemen. is this a situation we need to watch out for? >> absolutely. now.emenis have it right yusef: thank you for your insight. that is all we have for this edition of "bloomberg markets: middle east." u.s. equity futures lower, and asian equity session under pressure. is this the beginning of a larger correction? link technology --when pregnant couple
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